Data and the regulation of e-commerce: data sharing vs. dismantling

This paper considers an e-commerce market wherein a vertically integrated marketplace competes downstream with a single retailer and upstream with an independent parcel delivery operator. Because of the information collected by the marketplace on customersíhabits and preferences, the integrated parcel delivery operator has lower delivery costs than its competitor. Products are di§erentiated according to the retailer and the parcel operator who delivers them. The representation of product di§erentiation is inspired by the Anderson, De Palma and Thisse (2002) discrete choice model. We study several scenarios each representing a speciÖc policy implemented to regulate the marketplace. The Örst one is a data sharing policy. The integrated marketplace has to share its information with the other delivery operator which in turn will lower this operatorís cost of delivering the marketplaceís product. The second one is vertical separation under which the parcel delivery operator previously owned and managed by the marketplace becomes independent. Finally we consider a full dismantlement scenario under which there is both vertical and horizontal separation. We show that the optimal policy is either complete dismantlement or data sharing. The relative impacts on consumer surplus and total welfare of these two options involve a tradeo§ between the increased competition implied by complete dismantling and the data related delivery cost advantage achieved under data sharing. When this cost advantage is small, completely dismantling dominates, while data sharing is the best policy when the cost advantage is large.